Tuesday, March 28, 2006

Populism

All it takes for a tarnished, jaded organisation, bereft of any serious or original ideas, to buy good publicity cheaply is to come up with a little populism.

Thus it is that the EU commission has latched on the (historically) high price of using mobiles abroad - the so-called "roaming charges" – and is proposing a new, EU-wide law banning mobile operators from making these charges.

You can already imagine the propaganda value of such a move, with the commission adding "cheap mobile calls abroad" to the list of other "benefits" it parades, such as cut-price air fares and er… er…

Anyhow, the EU's largesse is not impressing Europe's largest mobile operator, Vodaphone which, according to Reuters, has warned the EU against rushing in with a new regulation.

With about 100 million users throughout Europe, Vodaphone had written to the commission telling it that competition among operators is already forcing charges down and any "ill-judged" move could have unforeseen effects on the industry.

For sure, roaming revenues are currently a lucrative source of revenues and earnings for mobile operators and a steep cut could hit them hard, with the investment bank Credit Suisse predicting that outright scrapping would cost operators seven to none percent of revenues and around 15 percent of earnings.

But Vodafone points out that its own charges fell 30 percent in the last year for contract users, and sees competition driving them down further. "The normal reason why you regulate is that markets are failing in some way," says Richard Feasey, Vodafone's director for public policy. Therefore, he adds, the commission "will need to explain, given that national regulators have looked at this market and not found any market failure, why the Commission comes to a different view".

The operators' own GSM Association claims that any new regulation on roaming would increase uncertainty and could put at risk further investment and development of new services, with Vodafone arguing that roaming charges were just one element in which mobile operators competed with each other, and urged that market forces be left to decide how much they fell.

"Although it might appear to be an attractive and politically popular objective, there is no reason why retail prices for roaming and those for domestic mobile calls should be expected to 'converge' or be exactly the same," the company said.

Therein lies the rub. The operators are in competition with each other, and will package their charges according to what they believe the market will bear. If the EU interferes with that package and forces prices down in one sector, you can bet your last euro that the operators will simply make up the revenue elsewhere.

The end result could be that we all end up paying more, simply because those who travel abroad with their mobiles can pay less. But, when there's propaganda to be made in them thar hill, you can't expect the EU to listen.